The Wall Street bailout of 2008
has radically altered the banking business. The bailout was supposed to keep
credit flowing to Main Street, but it has wound up having the opposite effect.
Small and medium-sized businesses have traditionally been the main engines for
increasing employment, and they need bank credit for their working capital; but
today credit to local businesses has collapsed nearly everywhere.

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That's why so many states--the
total is now fourteen--are considering turning to state-owned banks to get local
credit flowing again.

The Bailout that Missed Main Street

The credit collapse of September
2008 was triggered by the speculative activities of giant Wall Street banks.
These profligate banks, which would have gone bankrupt without federal support,
have emerged from the crisis bigger and more powerful than before. The federal
government has supported and subsidized bank consolidation, resulting in the
elimination of more than a thousand community banks by takeover or failure.

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The five largest banks now
hold 40 percent of all
deposits and 48 percent of all bank assets. These banks--Bank of America,
Wells Fargo, JPMorgan Chase, Citigroup, and PNC--currently control more deposits
than the next largest 45 banks combined.

They are big, they are powerful, and
they have lost interest in local lending. In the past three years, the four
largest banks have cut back on small business lending by a full 53 percent. The two banks that were the
largest recipients of TARP funds, Bank of America and Citigroup, have cut back
on local lending by 94 percent and 64
percent, respectively.

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling WEB OF DEBT. In THE PUBLIC BANK SOLUTION, her latest book, she explores successful public banking models historically and (more...)